Primary menu

Tag Archives: McClellan

It feels like people are preparing their portfolios for a favorable FOMC announcement like people prepare their finances by buying lottery tickets….neither are sure things and both can be dangerous. Things just feel shaky, like a house built on unsolid ground. If Bernanke doesn’t take the stage tomorrow afternoon and give the market exactly what it’s hoping for, people will be pissed. We have experienced the Fed providing equities and commodity markets ‘juice’ since the initial easing in 2008. Those with investment accounts have benefited greatly while those with savings accounts have been taking behind the shed and beaten.

When looking at price and volume I feel agnostic. The positive moves in momentum continue to play out and there definitely are signs of a ‘healthy’ rally but I’m just not seeing the shift into higher beta areas. We’ve seen a nice rebound in the percentage of stocks trading above their 50- and 200-day moving averages, small caps, financials, and tech seem to be enjoying some spotlight again. However, it just doesn’t feel like a sustainable rally when you take out the hopes of more Fed easing.

Buying volume currently hasn’t taken out its late-May pop that the S&P 500 recently did. The ‘risk off’ sectors such as health care, consumer staples, and utilities have maintained their relative performance grip on the market, something we don’t typically see in a sustainable rally.

I’m also noticing we have already gotten a little frothy, with the McClellan Osc. breaking above 80, which hasn’t done wonders for equities the past four times this has occurred since 2010. Now this is not a large data sampling, and things don’t always repeat themselves. But as always, I’m just writing about what I see.

If Bernanke announced QE3 tomorrow, all bets are off and we could possibly see a shift back into the high-octane names we saw during previous FOMC intervention. But if Bernanke leaves those few precious sentences out of his announcement tomorrow, it appears a lot of traders will have some adjusting to do pertaining to their risk exposure. Just an observation, I have no foresight into the matter but I will be watching (like everyone else) to see what is said.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.

As I’ve discussed before, one of my favorite weekly emails comes from Tom McClellan. This week he dove into a different way to analyze the McClellan Oscillator. I found this important and thought I’d pass on Tom’s wisdom…

From Chart In Focus:

There is a rule that we use when interpreting the Oscillator’s structure: The complex side is the strong side. What I am referring to is a complex structure that is entirely above or below zero, with lots of chopping up and down but without a crossing of the zero line. When you see that, the message is that whichever side of zero it is forming on is the side that is in control. So a choppy complex structure above zero means that the bulls are in charge, whereas a complex structure below zero means that the bears are in charge.

A “simple” Oscillator structure is one where you see it move across the zero line and then turn straight around without building any complexity. Such a structure says that there is no control of the market by the side on which the simple structure forms.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.